We have a question.

We have a real property asset with mining and mineral rights attached that has an extremely high value. What would we have to do, and whom would we have to contact, to arrange for a letter of credit that is only 1/3 of the value of the asset? Do we arrange for a BG or something like that to accomplish this?

We wish to use this idea to fund projects that are ready to be started, by making the letter of credit into a line of credit. Thanks, everyone, for your input.

Paula and Paul
Scribes Unlimited

My solution would be to get an asset-backed letter of credit, and then borrow against it.

If you wanted to make it more complicated, securitise the future cash flows from the mine!!!

An asset-backed Letter Of Credit.

Do you have any idea how we could secure that?

Paula and Paul
Scribes Unlimited

First you have to establish the ownership, than you have to establish the mining resource existence, than the mining resource feasibility for mining in market environment, than you have to show at least letters of interest of well established companies to do the mining, then have a business plan which spells everything out, have a good mining law firm with legal opinions issued already than you sit down with either the main mining lenders in the jurisdiction and do the financing, do not start in the middle, only work with reputable firms which are well known for the commodity and do not cut corners

you will find an info link to a 2002 paper which will give you indications through different jurisdictions at:

http://sapphirecapital.proboards101.com/index.cgi?board=commodities&action=display&thread=330

I do not post it as a text because it is 31 pages

we do have a good experience in mining files ( as well as with other) with the following law firms:

Fulbright & Jaworsky LLP (http://www.fulbright.com)

If my register is still up to date the following are the most involved within the firms Mining department:
Metals and Mining

Michael W. Anglin
+1 214 855 8054
Dallas
Partner

C. Mark Baker
+1 713 651 7708
Houston
Partner

Johnathan C. Bolton
+1 713 651 5113
Houston
Senior Associate

Robert A. Burgoyne
+1 202 662 4513
Washington, D.C.
Partner

David L. Fox, Ph.D
+1 713 651 8231
Houston
Senior Counsel

J. Scott Maberry
+1 202 662 4693
Washington, D.C.
Partner

Thaddeus Rogers McBride
+1 202 662 0287
Washington, D.C.
Senior Associate

Barclay Richard Nicholson
+1 713 651 3662
Houston
Senior Associate

Paul Christopher Sarahan
+1 713 651 5493
Houston
Counsel

John E. Schneider
+1 713 651 5462
Houston
Senior Counsel

J. Todd Shields
+1 713 651 3762
Houston
Partner

Ryan Ladd Thompson
+1 214 855 8292
Dallas
Associate

T. J. Wray
+1 713 651 5585
Houston
Partner

you may start with an associate just toorient yourself, they are a bit cheaper, however on the higher level you will find billing of just around 1000$ per hour; but very good people.


Very good is Jones Day ( http://www.jonesday.com )
here the main players are:

Contact(s)
Lyle G. Ganske + Michael G. Marting
Cleveland,Tel: 1.216.586.3939

Michael Pabst
London, Tel: 44.20.7039.5959

a good experience was also registered with

White & Case LLP ( http://www.whitecase.com/energyinfrastructureandprojectfinance/ )
and
Robert Nelson at Thelen LLP http://www.thelen.com/index.cfm?section=attorney&function=Read&contactID=533 if he is still there.

Do not forget Sullivan & Cromwell LLP http://www.sullcrom.com/practices/detail.aspx?service=8

Local Firms upon request when you want them, these are more international players

Depending on the size of the mine and the minerals in the ground along with what Richard is suggesting, it will cost you northward of 750K to get this all together. It does not matter the cost as nobody is lending a cent for mining operations unless its already in operation and producing. Even then, many mines are shutting down for care and maintainence due to very low prices. In other words, wait for better days.

Bob, we are not making the mine available for production. It is going to become a held asset.

P&P

If you can pull off that "held asset" jazz let me know I've got several clients with diamond mines in Brazil and oil leases in Africa with assays that are not currently producing that are available.

Understood, but I did not say that the money spent will put it into production. A mine reserve report involves a few or many drill holes to see what is under the ground. That alone involves hundreds of thousands if not millions of dollars and maybe a year or so of time. It depends how detailed you want it to be. How else would you prove what the mine is worth and borrow against it? Getting this done is not cheap nor easy in this economic climate. Good luck.

you will still have to go through the steps because you have to establish marketvalue of the commodity after minin, minus mining expense to allow evaluation of the risk factor, lets say marketvalue is x but you have to invest y, so your profit is z plus minus fluctuations and time factors as well as certain risks, and then you have the actual value of the asset in ground; bankers or lenders will only go there is the calculation shows all that and a healthy margin. We do in ground lending on some structures but the paperwork has to be right, and why not, why should an asset holder get an easier treatment, just because he wants to speculate on the value?

Paul:


I did not say money spent will get you in production. Do you realize how much money it takes to get a mine started? Drill holes for a diamond mine or an oil well cost hundreds of thousands or millions of dollars.Going into production costs millions or billions more. You need to prove whats in the ground and it can't be done by making a guess or waving a magic wand like Wall Street did with money the last couple of years.

How about a "silver" mine with over $30MM in "ore" above ground that has been stockpiled since the 1950's. It is not "tailings", it's actually the rocks that originally had been broken off of all the "shiney" silver that was obvious and the rest was put aside. There is tremendous more below ground as well that hadn't been pursued. There is also tremendous amounts of zinc sulfite and high grade silica.

Looking for potential JV or creative types of funding. Any ideas?

thank you

Silver at 3$ per ounce mining cost and a market price of 9.46 $ per ounce with the increased market volatility as an industrial precious metal needs more back up to commence a mining based finance, the amount of 30M$ in silver is a bit on the low side but anyway, you have to update all the records if you want to do something about it.

Richard,

I appreciate your response. Updates and validations are already being prepared. We're looking for about $3MM-$5MM commitment. They don't have to write a "check" for the full amount. It can be broken down in phases to do "work". I suspect at the $3MM range should be enough to put enough strenght behind it to justify a feasible exit strategy. Potential Investor will receive full disclosure and transparency of what I'm saying.

Thank you

look at a mixed equity and debt placement with a SWAP facility allowing satisfied debt investors to SWAP for Equity, plan for a 3 year o profit term max, most investments we do on that small level we are looking for 10% interest on the debt instruments,you will find people reluctant to do a debt placement below 10M$, reason is the cost are the same for 3 or 10 or 100M, you could use a credit enhancement through either the placement agent or an insurance if you structure it right; but you have to do your homework

Frank:

Where is this mine located?

The value of the asset in mind is about $60 billion, give or take.

P&P

60M$ where and which asset?

Richard. It's 60 Billion US$ that Paul said....

Modjo

In a forum full of banking experts, when "billion" is mistaken so easily for "million".

The asset will be discussed in a conference call in a few hours. If we do not break ground or the results are not to our liking, Paula and I will present the offer formally here.

Paul

A 60 billion dollar mining asset?
There is nothing in the world and I mean nothing worth that much. Thats, for example, 60 million+ ounces of gold before production cost. A world class mine is 1 million ounces.
And nobody has approached the owners to sell the property in the last few years when there was sky high mineral prices?
Are you sure this offer did not come from Nigeria, Paul?

He did say it was in the "ground." There are plenty of billion dollar resources - many unfortunately cannot be extracted at a profit like gold sands in California, Oregon, and Alaska and of course the Athabasca oil sands.

A favorite line of boiler room salesmen back in the 70's was "Hitler's War machine" ran on coal gas.

Yeah, it did, but not when oil is $50 a barrel or even a %150 a barrel.

Yes, oil sands in Canada is worth hundreds of billions, but they spread over hundreds and hundreds of miles and it is mostly on gov't owned land. With oil at 40 per barrel, it ain't worth very much right now.

Richard,

thank you for your input. I appreciate your advice. In this respect the original value given of $30MM is on collateral that is already in a stage of refinement that I believe would be less than the appx. 30% of cost to value estimation from your calculation of feasibility to create tangible refined silver value. Now in regards to the other assets; zinc, silica, and below ground silver and gold, it has been projected to be in the hundreds of $MM and into the $B's. Originally the Principals were pursuing some type of platform as a collaterized asset that could be either wrapped or hypothecated with a debt instrument. I think this mine ( actually there are 5 separate locations on these mines ) should justify a tradable instrument in the $100MM++ range to be backed up by the existing provable assets.

Ideally would like to find an "equity" partner first that is around $5MM deep and in return could negotiate a respectable equity stake ongoing as well as a reasonable rate of return for a fixed period of time. This would resolve the infrastructure cost to make this process of creating the $30MM manifest, which could then be pledged as "hard" value that could leverage on some potential type of trading platform or be enough feasibility to have a "take out" in place from conventional financing to satisfy the equity partner. Any thoughts?

thank you



***surebob - the mine(s) in Idaho

We had a good talk with the broker for the mine. Now we have to write up a joint-venture agreement and present to the board. If the board accepts, we can then use the asset to obtain a line of credit.

This isn't a Nigerian scam, by the way. The reports and assays show $5 billion on the surface - it says nothing about the assumed deposits not yet unearthed, of course, and a lot of deposits have yet to be tapped.

Needless to say, again, we're not trying to purchase the mine, or anything like that. We just want to obtain permission to form a line of credit with it to enter into trade. Simple, but effective.

Paul

I don't think reports and assay studies are going to do any good as they are general opinions of a geologist and not physical facts.
The only way to get money out of a mining asset is a bankable feasibility study like Richard indicated and they are not cheap to produce.

The assay reports and geological studies are from a certified geologist that values the properties FOR banks and other financial institutions - and people like us interested in using it for certain wealth. We are using this as COLLATERAL. We are not PRODUCING extra, nor are we seeking to PURCHASE the mine. We wish to secure the rights to ownership to turn it into a line of credit - that is all. Is it really that difficult?

P&P

Paul,

You need to get some perspective here and ask yourself some searching questions. The first and obvious question is why does someone who claims to be sitting on assets (above ground) equivalent to more than 10 times the annual USA total production of Silver need to do a JV with you. If they really only had a fraction of that volume available above ground they could easily fund through normal channels.

Second question is how sure are you of your so called "trade" element. As has been commented on this board, and others, many times the usual "JB" description of this business is very far from the mark and does not take any account of the realities.

One of these realities is that if you are trying to set up a structure to use OPA (Other People's Assets) for a financial transaction you had better make sure that you have everything put together correctly and with full transparency and involvement of the owner. To do otherwise will mean a guaranteed insurmountable compliance problem.

Key advice is to involve the correct level of professional advisors (Securities Lawyer, Mining Consultant, etc) and listen to what they say.

Xavier

First off, this is my fault entirely for not divulging full details of the project, but as you can imagine, there is only so much we can say without being indiscreet.

Everyone has raised great questions and concerns, and you have full assurance from us that these concerns WILL be addressed and taken care of. There is zero risk involved from either side.

Paul

Paul:

I don't think you get it and probably will never will.
A geologist's opinion is just that... an opinion. Most of the reports indicate that there "MAYBE" minerals in the ground and that you should spend more to "PROVE" whats in the ground. These reports are a dime a dozen.
If these reports were that good, they can go to the bank today and raise money to do what you are trying to do.
Since they cannot do that, they are talking to you and you are asking the same questions because you don't know what to do. GET IT?
If it was that easy to get money, there are thousands of the geologist reports for mines in the USA and Canada floating around looking for money. I can show you a report from Mexico saying their trees are worth 6 billion dollars. Means **** and they will not get any money.

No need to be gruff, Bob.

Paula and I are pretty confident that the board of directors will accept our JV agreement as we have written it - her and I both have legal writing experience as well - and we're looking forward to the next step.

I'm not sure why it's so hard for you to understand that sometimes transactions DO work.

Otherwise, why would anyone bother to keep trying?

Paul

Paul,

Boy, good luck getting that credit line. Please do keep us
posted, as I have a client with a large supply
of isotopic copper--admittedly a notoriously difficult asset
to monetize. They've been trying to get a line of credit
forever. Trade programs, even the ones that claim they'll
take assets, are tough as well.

Also, not to nitpick your legal writing experience,
but in terms of English grammar, it's, "She and I," not
"Her and I."

Sorry, it's just that I grew up being hounded by my
mother--a merciless grammarian.

Oh, not a problem.

I've been set upon by worse editors than you.

We will let everyone know how things are progressing. We will certainly be optimistic. It all just comes down to knowing the right people at the right time.

Paul